Historically, discussing salaries was discouraged among both contingent and full-time workers, often under the guise of privacy to maintain workplace harmony.
Recent legislative changes and a shifting workforce culture have ushered in a new era of pay transparency. While this openness has primarily impacted full-time roles with established pay structures, there’s growing momentum to also extend transparency to contingent workforce management.
Let’s explore the concept of pay transparency, examine recent legislation in North America and Europe, and get actionable advice on how businesses can successfully implement this approach.
Pay transparency is the practice of openly sharing information about employee compensation with candidates, current employees, and potentially the general public. The disclosed information goes beyond just base salary and can encompass details like bonuses, commission structures, salary ranges for specific roles, and how compensation changes with promotions.
Pay transparency plays a crucial role in reducing wage disparities and ensuring fair compensation:
Furthermore, this openness can reduce the pressure and awkwardness of salary negotiations for both employers and candidates, as the displayed pay rate sets clear expectations. Overall, pay transparency improves hiring outcomes and fosters employee satisfaction in the long run.
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Here’s a summary of the legislative developments on pay transparency across selected regions:
While there’s no comprehensive federal law in the U.S. as of July 2024, activity is already happening at the state level. Currently, 10 states require pay transparency. Key state-level regulations include:
On top of that, more states and local jurisdictions are passing laws that prohibit employers from asking about applicants’ salary history during the hiring process.
Similar to the U.S., there’s no federal law directly requiring pay transparency, but the Pay Equity Act, effective in 2021, requires employers in federally regulated workplaces with 10 or more employees to identify and correct pay disparities.
Despite the absence of federal law, five of 10 Canadian provinces have enacted or proposed pay transparency legislation:
While these regional initiatives represent significant strides toward pay transparency in North America, there’s still room for further development. National frameworks could foster even greater consistency and impact, accelerating the shift towards a more equitable workplace for all.
The European Union has taken significant steps towards pay transparency with the adoption of the EU Pay Transparency Directive in 2023. This Directive aims to harmonize pay transparency laws across EU member states, requiring them to transpose the Directive into national law by June 2026.
The Directive mandates several key actions for employers:
In the UK, pay transparency is currently voluntary, subject to data protection restrictions. However, the UK has had gender pay gap reporting requirements in place since 2017, requiring companies with more than 250 employees to report on pay structure and providing specific statistics on gender pay gaps.
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In the UK, where pay equity laws have been in place for a considerable time, managed service providers (MSPs) have effectively adapted their practices. They ensure that vendor management systems (VMSs) are configured to support pay transparency. These systems not only prevent vendors from inflating mark-ups to maximize profits, but also guarantee a fair assessment of salary ranges.
In contrast, the situation in the U.S. is less developed. Pay transparency isn’t yet a significant focus for MSPs, and many third-party staffing companies only comply when legally required. However, there’s a growing push for these practices, driven by clients and MSPs who recognize the benefits of transparency.
A 2022 report from a compensation software company revealed that 60% of 1,000 employed U.S. adults surveyed would switch to companies with more pay transparency. This push is further fueled by the increase in remote jobs, where workers from states with pay transparency laws now advocate for similar practices in states without such laws.
To remain compliant and competitive, companies should proactively embrace pay transparency rather than waiting for legal mandates. This proactive approach can position them as employers of choice, particularly in a market facing significant skill shortages. A 2024 survey from Manpower Group indicated that 75% of 40,077 employers across 41 countries reported difficulties in filling roles.
Here are suggested steps for implementation:
By taking these efforts, companies can foster a more equitable and attractive work environment, ultimately benefiting from a more engaged and satisfied workforce.
Irene Koulianos – Program Manager
Irene Koulianos brings a decade of experience in contingent labor staffing and recruitment to her role as Program Manager. She helps new and existing clients to develop best-fit vendor management solutions for their contingent labor programs. This includes product demonstrations, completing bids, and supporting the product team with roadmap initiatives. In addition to this primary role, she is passionate about building eLearning solutions for clients, partners, and internal VectorVMS staff leveraging Learning Technologies Group products. Prior to joining VectorVMS, Irene worked for large international staffing organizations as well as smaller boutique IT recruitment firms. She has a deep understanding of the contingent workforce landscape which helps her create meaningful solutions for her clients. Connect with her on LinkedIn.